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Thursday, April 11, 2019

Investing Directly in Equities or Using Mutual Funds?


Investing Directly in Equities or Using Mutual Funds?

Many investors now believe that equities help create wealth over a long-term period.

However, they are confused on investing directly in equities or / using mutual funds.

1.What is the ticket size required for equity mutual funds?

You can invest in equity mutual funds, which has a basket of stocks in its portfolio with as little as Rs. 500. 

As compared to this, many blue chip stocks have a higher price individually , making entry point in stocks generally higher than mutual funds.

2. What tax benefits do mutual funds offer?

When an investor buys and sells shares be fore completing one year, he has to pay short term capital gains tax.

However, in a mutual fund, the fund manager may keep transacting in shares at varying points of time. If investor remains invested for more than one year in an equity fund, his/her gains are tax free since securities transaction tax (STT) is already deducted.

3. How does a fund manager work for the investor?

Stock prices could be affected by a number of variables which could be company fundamentals or even the external environment.

As an individual investor, one does not have the time and the resources to research, track and identify stocks on your own. An individual may get carried away due to sentiment and may go overboard on a particular stock.

A mutual fund has a professional fund management team, which tracks and evaluates stocks on a regular basis. A fund manager cannot buy any stock as there are many risk management guidelines in place.

There are limits on how much a fund manager can invest in each stock and each sector, which helps in the long term. A fund manager's decision to invest in a particular share is backed by strong research from his team.

4.How liquid are mutual funds?

An individual stock may not always be liquid. At times, on a bad announcement, a stock could be on a lower circuit and even if you wish you cannot sell it at any price.

Similarly , on a good announcement the stock may be on upper circuit. Such liquidity problems are not faced by a mutual fund investor. An open-ended fund can be bought sold at that day's NAV (net asset value) by simply approaching the fund house or its registrar or a distributor.

Src: ET, Prashant Mahesh




Investing Directly in Equities or Using Mutual Funds? Reviewed by Investment Guru on April 11, 2019 Rating: 5 Investing Directly in Equities or Using Mutual Funds? Many investors now believe that equities help create wealth over a long-term per...

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